Good accounting software does three things: records income and expenses, handles VAT returns and self-assessment, and — from April 2026 — meets HMRC’s Making Tax Digital (MTD) requirements. Here is how the main UK options compare for 2026.
Making Tax Digital — What You Need to Know First
MTD for Income Tax Self Assessment (MTD ITSA) requires self-employed people and landlords to submit quarterly income and expense summaries to HMRC using compatible software. The rollout:
| Phase | Start date | Who is affected |
|---|---|---|
| Phase 1 | April 2026 | Self-employed + landlords earning over £50,000 |
| Phase 2 | April 2027 | Self-employed + landlords earning over £30,000 |
| Phase 3 | TBC | Below £30,000 |
All affected businesses must use HMRC-approved software. Check the HMRC MTD software list before choosing.
Software Comparison — UK 2026
| Software | Best for | Monthly cost (standard) | MTD-compatible | Free tier |
|---|---|---|---|---|
| FreeAgent | Freelancers, contractors, sole traders | £19/month (free with NatWest/RBS) | Yes | No (free via bank) |
| QuickBooks Self-Employed | Sole traders, simple businesses | £8/month | Yes | No |
| QuickBooks Online Simple Start | Small businesses, VAT registered | £14/month | Yes | No |
| QuickBooks Online Essentials | Growing businesses with time tracking | £28/month | Yes | No |
| Xero Starter | Small businesses, sole traders | £16/month | Yes | No |
| Xero Standard | Growing businesses | £33/month | Yes | No |
| Sage Accounting Start | Sole traders | £14/month | Yes | No |
| Sage Accounting | Small-medium businesses | £30/month | Yes | No |
| Kashflow | Small-medium businesses | £10/month | Yes | No |
| Wave | Very basic bookkeeping | Free | No | Yes |
Prices as of May 2026. Most providers offer 50–90% discount for 3–6 months.
Feature-by-Feature Comparison
| Feature | FreeAgent | QuickBooks | Xero | Sage |
|---|---|---|---|---|
| MTD ITSA | ✓ | ✓ | ✓ | ✓ |
| MTD VAT | ✓ | ✓ | ✓ | ✓ |
| Bank feeds | ✓ | ✓ | ✓ | ✓ |
| Invoicing | ✓ | ✓ | ✓ | ✓ |
| Expense tracking | ✓ | ✓ | ✓ | ✓ |
| Payroll | Add-on | Add-on | Add-on | ✓ on some plans |
| Self-assessment tax estimate | ✓ | ✓ (SE plan) | ✗ | ✗ |
| Multi-currency | ✓ | ✓ | ✓ | ✓ |
| Stock management | ✗ | ✓ | ✓ | ✓ |
| Accountant access | ✓ | ✓ | ✓ | ✓ |
Which Software Is Right For You?
Sole trader / freelancer (simple income, no VAT)
Best choice: QuickBooks Self-Employed (£8/month) or FreeAgent (free via NatWest)
Both estimate your Income Tax and National Insurance, track mileage, and connect to bank feeds. FreeAgent is the best value if you bank with NatWest, Royal Bank of Scotland, or Ulster Bank.
VAT-registered sole trader or small limited company
Best choice: Xero Starter (£16/month) or QuickBooks Online Simple Start (£14/month)
Both handle VAT returns and MTD VAT. Xero has the larger UK accountant partner network — if your accountant is on Xero, start there.
Growing small business (employees, multiple income streams)
Best choice: QuickBooks Online Essentials (£28/month) or Sage Accounting (£30/month)
Sage has the advantage of built-in payroll. QuickBooks has better integrations with third-party tools.
Cost Comparison — Annual Total
| Software | Monthly | Annual | Notes |
|---|---|---|---|
| FreeAgent (via NatWest) | £0 | £0 | Requires NatWest business account |
| QuickBooks Self-Employed | £8 | £96 | SE-only; not for limited companies |
| Xero Starter | £16 | £192 | Limited invoice volume |
| QuickBooks Online Simple Start | £14 | £168 | Good for small VAT-registered businesses |
| Sage Accounting Start | £14 | £168 | Good UK support |
FreeAgent through NatWest is the standout value option — NatWest business current accounts start at £0/month for the first 18 months (then £8.50/month), making the combined cost competitive even after the free banking period ends.
Making Tax Digital Compliance — Checklist
Before April 2026 (or April 2027 if your income is £30,000–£50,000):
- Confirm your software is on the HMRC MTD ITSA approved software list
- Sign up for MTD with HMRC (sign-up opens 6 months before your mandatory start date)
- Connect your software to your bank for automatic transaction feeds
- Understand the quarterly deadlines: April 5, July 5, October 5, January 5
For more on self-employment tax see self-employed tax guide, registering as self-employed, and business expenses guide.